Cerium oxide nanoparticles have now significant presence in biomedical fields due to their wide applications; however, challenges regarding their safety and biocompatibility persist. Polysaccharides based biopolymers have inherent hydroxyl and carboxyl groups, enabling them to govern the surface functionalization of cerium oxide nanoparticles, hence their chemical and physical characteristics. Because of this, polysaccharides such as dextran, alginate, pullulan, chitosan, polylactic acid, starch, pectin, and glucose are practical substitutes for the conventional coatings used to synthesize cerium oxide nanoparticles. This review discusses the effect of biopolymer coatings on the properties of cerium oxide nanoparticles, such as size, stability, aggregation, and biocompatibility. Additionally, it also summarises various biomedical applications of polysaccharides coated cerium oxide nanoparticles, such as in bone tissue regeneration, liver inflammation, wound healing, and antibacterial and anticancer activities. Biocompatible cerium oxide nanoparticles will surely improve their applications in the biomedical field.